Canada: Saskatchewan Expands And Modernizes Its Pipeline Law

Saskatchewan's Ministry of Energy and Resources is planning
on expanding and modernizing its pipeline legislation in response
to criticism in a 2012 provincial auditor's report and a
1,500-barrel oil spill by Husky Energy this summer on the shoreline
of the North Saskatchewan River. Bill 43, The Pipelines
Amendment Act, 2016, will amend The Pipelines Act,
1998 to, among other things, require licensing of flowlines,
impose new pipeline license and records transfer requirements,
grant new inspection, investigation and compliance powers to
ministry staff and allow for increased penalties.

In 2012, the provincial auditor noted that the legislation
administered by the ministry only regulated spills from wells and
facilities and not from pipelines. The provincial auditor also
noted that the 68,000 flowlines that then existed in the province
were exempt from the Act but posed the same risk of leakage as
pipelines regulated by the legislation.

On July 21, 2016, ground movement near the North Saskatchewan
River caused a Husky Energy pipeline to release over 1,500 barrels
of oil and emulsion onto the shore and into the North Saskatchewan
River. Downstream water users, including three cities, had to stop
withdrawing water from the river for several months.

Licensing of flowlines

Currently Saskatchewan has over 80,000 flowlines. Flowlines are
small pipelines connecting an oil or gas well to a battery,
injection facility or gas compression or processing facility. The
current legislation sets requirements as to how flowlines are
designed, constructed, tested, operated, maintained and repaired
but does not require them to be licensed. Accordingly, the ministry
does not have records of where the flowlines are located in the
province or documenting that they are designed, constructed and
operated according to the law. If enacted, Bill 43 will enable the
creation of a flowline licensing regime, which is expected to be
phased in over time. Details on the flowline licensing process have
not been released.

License and records transfer

Presently, a pipeline license may be transferred with the
minister's approval. If enacted, Bill 43 will replace this
provision with one modelled after the license transfer requirements
set out in Saskatchewan's Oil and Gas Conservation Act for
wells and facilities whereby eligibility requirements must be met
for a well or facility license to be transferred. This change will
ensure consistency for all well, facility and pipeline license
transfers.

Presently, pipeline licensees are supposed to have in their
possession various records about the pipeline's location,
depth, design, construction, testing, operation and maintenance.
The transfer provisions proposed by Bill 43 will also require the
pipeline license holder to promptly transfer all of these pipeline
records to the transferee, making this requirement consistent with
what is required in Alberta. In Alberta we are finding that
pipeline operators do not always have all the required records and
must undertake expensive engineering assessments of their pipelines
where records are missing, especially for older pipelines. We
expect the same issues to arise in Saskatchewan.

Compliance and penalties

Bill 43, if enacted, will give the ministry new compliance
powers, including a power to require a licensee to comply with a
provision of the legislation or a directive or license issued under
it. Bill 43 will also give ministry staff modernized powers to
carry out inspections and audits, including searching computers and
other data storage devices. Further, a new regulation-making power
is contemplated whereby in the future regulations can be created
that will require licensees to post with the ministry financial
security for their pipelines and licensed flowlines. Finally, Bill
43 contemplates increasing the maximum fine for a contravention of
the Act from $50,000 to $500,000.

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